Will the upcoming consolidation be a catalyst for ETH price?

The Ethereum merge is expected to arrive on September 15, and crypto traders and analysts believe that once the upgrade is released, it will have a strong impact on the Ethereum price.

With the merger imminent, Ethereum fundamentals appear to be more solid than ever. Investors are increasingly speculating on future price movements. The crypto community at CoinMarketCap expects Ethereum to trade at $2,102 by September 30, 2022, which would be a 29.16% increase from the asset’s current price.

Expert opinion: Consolidation is a catalyst for ETH price

Bloomberg analysts discussed Ethereum’s undervaluation in April and issued a $6,000 price target.

Finder.com recently released its latest Ethereum price report. If you hold Ethereum, you should be prepared for high volatility in the coming months. Fintech and cryptocurrency experts predict that the Ethereum price will first rise to $2,673, then fall to $675, and finally reach $1,711 by the end of the year.

However, experts are more optimistic about the long-term price outlook. They believe that the ETH price will reach $5,739 by the end of 2025 and $14,412 by December 2030.

Katie Talati, head of research at investment firm Arca , believes that the current price of ETH is severely undervalued and the catalyst is coming.

Next month, Ethereum will see billions of dollars worth of cryptocurrency, millions of users, and thousands of applications move to a new and improved blockchain. This is the culmination of years of research and development that will culminate in what’s known as the merge, the actual technical deployment of Ethereum’s proof-of-stake chain.

“A lot of people are underestimating this event, especially based on the current ETH price appreciation,” Talati said. “We’re going to look back a year from now and (realize) we were at the (market) bottom.”

From Arca’s perspective, Talati has observed an increase in retail interest in cryptocurrencies over the past few weeks. However, she said, “there are no new institutions coming in, and those will be the more important and larger buyers [of Ethereum].”

Talati said there are structural reasons why people expect the price of ETH to appreciate after the merger.

She said that “from a financial perspective, the net issuance of [Ethereum] supply will be net negative.” In other words, Ethereum is expected to be a deflationary asset that will become more valuable over time.

This is a result of Ethereum Improvement Proposals developed last year (specifically EIP-1559), which would have destroyed ETH as part of every successful transaction and altered the issuance of ETH after incorporation.

Users who stake their assets will not be able to withdraw them immediately for at least six months after Ethereum abandons proof-of-work. This creates a “supply pool,” she said, essentially limiting the issuance of new ETH entering circulation.

Add to that the fact that people will now be incentivized to lock their ETH on Ethereum to earn staking rewards.

“You’ll see the circulating supply of [ether] increase as it’s staked, but it won’t actually be available for individuals to sell,” Talati said.

Some have referred to this as Ethereum’s “third halving,” and these programmatic supply cuts are sometimes thought to boost prices.

Rekt Capital, a well-known crypto trading expert, noted in his technical analysis that ETH could soon create a lower high, similar to 2021. He said: “This is not impossible, as ETH has recently failed to retest the orange area as support. Therefore, it is possible that ETH could bounce back to orange in relief to confirm it as resistance.”

Mike Novogratz, CEO of cryptocurrency investment firm Galaxy Digital , said Ethereum is currently his most determined cryptocurrency trade. A report released in early August said the merger would help Ethereum move toward becoming a "global institutional-grade asset."

Traders in the Ethereum options market are already betting on consolidation. Call options are much bigger than put options, with most traders on major derivatives exchanges choosing strike prices between $1,850 and $2,200.

Call options on Ethereum give the contract holder the right to buy the cryptocurrency at a fixed price, while conversely, put options give the contract holder the right to sell it at a predetermined price.

Meanwhile, Ethereum’s open interest on Deribit , OKEx, Bit.com , and CME has also risen sharply from a low of $2.6 billion in July to around $7.8 billion at current levels. The put-to-call ratio is 1.64, meaning traders expect future price increases before September 15.

risk

Still, there are risks to the deal. First, there’s the possibility that Ethereum’s merger could be delayed — which would send a “negative signal” to the market, at least in the short term, and then there’s the chance that something could go terribly wrong during or after the deployment, a risk that’s hard to calculate. Ethereum upgrades have been delayed several times before.

Another risk is that all plans and possible Ethereum forks that retain the proof-of-work algorithm will be left untouched. Talati said this would disrupt the market. Some well-known cryptocurrency companies have already pledged to support some PoW forks, such as Chandler Guo, a well-known miner and investor.

ETH could also face selling pressure once people are able to unlock their tokens. Some people have locked up their ETH for nearly two years, since the so-called Ethereum 2.0 deposit contract went live with the experimental beacon chain . They have also received a return on their capital in the form of staking rewards, which can be sold for cash or reinvested.

“It’s hard to predict the behavior,” Talati said, adding that many early stakers are likely long-term Ethereum supporters who are reluctant to sell.

Investors appear to be aware of the downside risk. Talati said ETH put options, contracts that give people the option to sell an asset, are “very expensive” in the current market.

Kevin He, CEO of CloudTech Group, has made a bearish prediction for the ETH price at $750 by the end of this year. Nevertheless, he expects the price of ETH to reach $5,000 by the end of 2025.

If the Ethereum merger is successfully completed this year, Kevin He expects prices to rise, as PoS (proof of stake) and faster transactions will lead to increased demand for ETH from all different types of stakeholders. If market conditions ease in the second half of the year, ETH prices may rise to or break previous historical highs due to increased demand. If the merger does not take place this year, investor confidence in the project and team will inevitably be damaged by another delay. He said that in a bear market, ETH prices may fall to triple digits.

At least for now, the merger has succeeded in creating a sense of optimism in the Ethereum community. As investment in the token becomes more accessible, the merger is expected to have a positive impact on the overall price of Ethereum. In addition, ETH's appeal to institutional investors may increase due to the benefits of staking.